If you're new here, this blog will give you the tools to become financially independent in 5 years. The wiki page gives a good summary of the principles of the strategy. The key to success is to run your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. Not just any business but a business that's flexible, agile, and adaptable. Conversely most consumers run their personal finances like an inflexible money-losing anti-business always in danger on losing their jobs to the next wave of downsizing.
Here's more than a hundred online journals from people, who are following the ERE strategy tailored to their particular situation (age, children, location, education, goals, ...). Increasing their savings from the usual 5-15% of their income to tens of thousands of dollars each year or typically 40-80% of their income, many accumulate six-figure net-worths within a few years.
Since everybody's situation is different (age, education, location, children, goals, ...) I suggest only spending a brief moment on this blog, which can be thought of as my personal journal, before delving into the forum journals and looking for the crowd's wisdom for your particular situation.

In a nutshell, engineering is making certain simplifying assumptions of the real world and building a piece of technology by combining separate parts to build a functional whole. During this engineering process, the degrees of freedom, that is, the play between its components is reduced as much as possible. This is possibly due to the limitations of the brain power or comprehension of the human engineer. As a result, most technology only has a few degrees of freedom. Some of the most complicated devices, like nuclear bombs only have a few dozen (this is a lot).

The 20th century saw many fields get engineered. I will discuss three of them. The first field to receive the engineering treatment was the socio-economic system. As a result, communism was a new design that led to enormous suffering. Fascism was another. I am not going to go into details, but socio-economic engineering are all based on the idea that humans are essentially “particles”, and so if we have enough particles and we know the “microphysics”, that is, the laws governing individual particles, we can predict, design and create large scale human behavior. Some of these designs failed. Other designs have so far been successful. If you wonder why you prefer particular brands, you are the result of one of the successful experiments.

The next field to be subjected to engineering was physics. The result was the nuclear bomb and the power to wipe out human civilization. Through a fantastic show of diplomatic skill, game theory, and forced collaborations, politicians avoided getting us all killed. This was possible because there were few degrees of freedom; here, that is, few nations had the bomb. Now that more and more nations become club members, the problem is getting more and more complex. I hope it does not become unsolvable. Although the inventors of the bomb knew the consequences, game theory clearly states, that the risk of the other guy “cheating” when you don’t is much too large. Therefore I fully support development of nuclear weapons … on our side, because the human level of civic mindedness is too low. To put it in other words. I am sympathetic to the anti-nuclear crowd, but the problem is that I do not think that the anti-nuclear crowd of the opposing side is anymore effective than ours. It’s the complete picture that counts. Now, despite scientists refusing to take responsibility for their actions of creating the bomb, politicians avoided mutual destruction.

This was not the case for financial engineering. Financial engineering is the synthesis of new contracts by combining existing contracts. Like with all technology, it’s use depends more on the user than on the inherent qualities of the technology. Guns don’t kill people. People kill people. Incidentally, people kill more people with cars than with guns. I digress. Financial engineering could have been used to greatly reduce risk in the system. Unfortunately, the choice was made to use this protection to “fight bigger wars”. This is not much different than from what happens in collision sports (Without any direct knowledge, I get the impression that Wall Street recruit a large number of ex-jocks?) when better protective technology is introduced, like helmets and padding. Better protection does not lead to safer play. Rather it leads to more risk taking. While the small injuries are reduced, it tends to increase the likelihood of rare but dangerous events, which were previously avoided by playing it safe, as the smaller injuries were bad enough. This is the problem whenever the goal is to win.

The reason nuclear war did not break out was that there could be no winner.

The next field to be engineering is biology. Whether this will lead to the equivalent of communism (like Darwinism lead to eugenics in Germany, the US, and many other “scientific” countries), or the equivalent of everybody having his own bomb is a matter to be determined. Imagine that the genetic kits that Freeman Dyson imagines being part of science fair projects being used to make something similar to, oh say, a computer virus. A genetic virus constructed by an clever teenager lacking the wisdom and full intelligence/appreciation of the consequences of his actions. The difference between biology and computing is categorical. A computer virus may destroy your files. A genetic virus might destroy your food, or your life. It is in my opinion a huge problem, when technology is invented by people with little wisdom (in general anyone younger than 60) when it comes to human experience and have that technology be used by the very same. An pragmatic solution would be the nuclear solution: Let the young invent the technology, but hand over its use to the wisest generation.

Perhaps there are some technologies that should not be used. Unfortunately, it would seem that humans have not attained the required degree of wisdom to make such choices in advance. However, to our defense, as humans, it seems we are able to make the right choices reactively when we are standing on edge of the cliff. Let’s just hope that this strategy of no foresight will keep working for a long time.

14 users responded in " When a field gets engineered… "

What’s interesting to me about the concept of MAD (mutually assured destruction) is that it is essentially an economic sinkhole.

We now have to pay, for the foreseeable future, insurance in the form of more and more deadly weapons that hopefully never get used all for the sake of making sure that nobody else does before we do.

You asked a while back what types of posts we wanted to see. I think a few people have stated this already, but it’s this type of post. We’ve seen the results of your method (or at least read about them), now we’re interested in the philosophy behind the results.

One side benefit of being in China is being among the first to see/comment on your newest posts.

Physimatics said,

Two points.

Engineering is just the catalyst that helps connect science and the real world. If you remove all forms of engineering from a company a new product could still be produced. Costs would be greatly increased as trial and error would be the only way left for development. Would anyone like to buy my new type of bicycle? It has square wheels.

We have been engineering ways to kill ourselves for thousands of years. Just look at the field of medicine before the arrival of germ theory. I think you were 7 times more likely to die in a civil war hospital than the Battle of Gettysburg.

Kevin M said,

Interesting and scary. I like that this post is followed by one entitled “How was your weekend?” I’m going to read it now…

Steven said,

I’m surprised at the lack of comments, this is one of your more controversial/terrifying (yet still interesting) posts yet!

From ECPD engineering is: [T]he creative application of scientific principles to design or develop structures, machines, apparatus, or manufacturing processes, or works utilizing them singly or in combination; or to construct or operate the same with full cognizance of their design; or to forecast their behavior under specific operating conditions; all as respects an intended function, economics of operation and safety to life and property.

If you are going on some really really loose definition, which you seem to be, then everything could be considered engineering. I engineered a hole with a shovel then engineered the whole to be filled back up.

I like how you put down the engineers, but talk up the politicians. “Through a fantastic show of diplomatic skill, game theory, and forced collaborations, politicians avoided getting us all killed.” Yet the politicians were the ones who had the bombs made in the first place. Wow they saved the mistake they made. I’m so impressed. Your logic on all philosophical matters seems to make no sense to me. I seem to like most everything else you write.

Jacob said,

@David – I use a looser definition of engineering (that doesn’t sound like a politically correct mission statement 😀 ). I just take out “scientific” with the understanding that economics and sociology is not science. But, it is “the application of principles to build structures”. Engineering would be creating the shovel, or the idea of a hole. Not the digging itself. You can synthesize an option with a trading strategy involving only stocks and bonds. It also helps me to consider federal reserve policy a form of engineering. By game theory, once the technology to build destructive devices exists, either everyone capable of building them have to be very evolved and decline building them or everybody has to build them in a MAD strategy. Those are the only two Nash equilibria. Maybe it’s more accurate to say that the politicians were smart enough to realize this.

David said,

No the politicians were like, make me a super big bomb that can level a city… so the engineers did that. And while they were at it… they realized, hey this could destroy the earth, maybe we shouldn’t finish making it. The politicians came and and said, sweet we have supreme power… lets use it to push people around with it. Then other countries found out how to build the nukes… and the politicians (after being advised from scientists and engineers) thought oh crap, maybe we shouldn’t have had this built. Maybe we should have used our engineers to solve meaningful problems like world hunger/peace. At least this is how I remember it.

It seems to me you paint an awfully nice picture of the politicians and make engineers out to be the devil. I feel the exact opposite way. That’s just my biased 2 cents.

Today, if Pakistan and India released all their nuclear weapons at each other, the entire world would end due to nuclear fallout.

In this sense the world is more dangerous than it ever has been before. I know you have read this example since you have read Taleb’s Antifragile.

For this reason I have a very hard time giving politicians “credit” for their use/non-use/threatening/posturing regarding nuclear weapons. Indeed, the opposite. It was politicians who assembled and financed the Manhattan Project and introduced this terrible modern condition where a nuclear black swan premised on a conflict between remote countries could at any moment end the human race.

Whose Other Name is Denise said,

This is kinda funny. Apparently both of us Densises live in Florida. I think I’ll change mine to ‘Whose Other Name is Denise’ to quell confusion. I’d use my first name, but it’s surprisingly rare. And while I don’t mind that, much, there’s a tiny chance my employer could discover my main motive to working for him. And while that’s not terrible, there is a tiny chance this could affect my job. Seeing as how I just got the go ahead from our HR Department (all of 1 person), to get a couple tattoos, I’d rather not play ‘Press Your Luck’ with my ERE plans

Now onward. I actually trust most of the politicians to not use nuclear war simply b/c the majority of them have it waaaay to good right now. Most countries are copying each other to become more intrusive/instrumental in their citizens lives and rather than control their governments, many people are happy to let their governments control, and watch, them. So, I do not think there will be a chance of nuclear war, by nations, any time soon. Some rogue individuals may come into the fray, but not countries.

The thing is, this article seems to come from the view of centralized, controlled, directed engineering. What we have seen from loosely the 1800s until the mid 1980s. What we’re not taking into account is the rise of the hacker/maker movement (please keep in mind that I am somewhat bias and firsthand knowledgeable, as I am both an engineer in training, an urban planner, and a hacker/maker). To put it quick, a hacker/maker is a person with a enough DIY skills, or willingness to cultivate these skills, who takes EVERYTHING in the world around themselves and modifies it to their liking in some extreme fashion (by extreme I mean not counting on a ready-made consumer fix/upgrade). This would include using arduinos, retrofitting your engine for alternative fuel, (and in my case in particular, also biohacking).

This area is rapidly growing, where any individual with the motivation can re-engineer, modify, build, reprogram, hack, create anything. Further, there are actual community groups, both online and off, where like-minded folks get together to share their knowledge, and make and hack (google ‘hacker maker space’).

This has unknown/newly discovered effects. It’s awesome to me. Once it reaches a certain level (arguably it already has-just look at the media industry), it takes the power out of the hands of the few and leaves established industries, companies, governments, and special interest groups, powerless, on a fundamental level. As every individual now has the capacity, should they develop the ability, to truly fashion their world as they see fit.

What we will witness, and hopefully take part in, is a shift in civilization and society unlike anything we’ve ever seen as a species. Well, unless you love science fiction… I do.

Take a look at how companies are having to adapt and adopt to open-source, or perish. There are things like BitCoin, causing governments to scramble for ideas on how to demonize it, because they can’t contain or control it. The current idea in Washington DC is to tax the hell out of it, which is great, b/c once it’s completely established (happening super quick- quicker than regulation-as many companies online have already adopted it, and it’s cheaper than PayPal), there will be a mass exodus from the dollar and generally corrupt world banking system. By the time governments create their own versions of BitCoin (with their many fingers in the pie), it’ll be too late. For them. Freeing us. If you think that way. For those that don’t like kaizen, adapting, or are ‘rich’ and getting richer off the current system AND are just plain stubborn, it could get ugly if they don’t jump ship fast enough.

I’m joining the movement. It’s ERE to the core, imo I aim to close all of my bank accounts in 5 years and give the bird to the system. I don’t rely on/use credit anyway.

Interesting analysis. Clearly engineering a field has some potential negative consequences. I wonder for some of these if its really possible to engineer the field. Its always seemed to me that for engineering to work successfully the pieces in the system need to be fairly predictable; however, when human beings become a part of the system, you have a piece which is prone to be unpredictable, even random at times. Maybe that really can be accounted for, and maybe it can’t. Its something I’ve always wondered about. Thanks for the intriguing post!

I’ve always enjoyed the movie Forbidden Planet. In that movie a supreme race, the Krell died in a single evening to their own great shock – the cause of which they themselves did not understand. We are becoming Krell. Monsters from the Id

Denise in Tampa said,

(This is not the other Denise in Florida, BTW.)

You say, Jacob, that guns don’t kill people, people kill people. It is not so much that I disagree, but that it isn’t so much the shooter of the gun that kills people, but those who have engineered this social system we live in to encourage that to happen who kill people.

It is like when you play a video game. So okay you choose whether to play or not and whether you care to be “successful” at it. But you do not choose what it takes to be successful, the game designer did that.

The engineering of the lives of ordinary people directs them to do lots of activities that tend to make them frustrated. Lots of TV shows and movies routinely teach us that killing the bad guy is the way to solve our problems. Lastly you make guns easily and readily available to allow an angry person to vent their anger at the person who is ticking them off at the moment. By dynamics such as these our whole lives are determined by those who have engineered our society for their own benefit.

To escape their Matrix takes extraordinary means for us rats whose fate it is to run in their maze.

I think I am in the camp of Isaac Asimov in his novel The Naked Sun where it isn’t the person who does the killing who is at fault, but the person who manipulates that person into killing who is at fault.

Whose Other Name is Denise said,

Denise in Tampa, you speak to my soul! Coincidentally, I just installed the Matrix screen saver on all of my work and home computers today… I’m following the white rabbit. Or is it following me? 😮

The scariest thing to me (and I’m an avid gamer) is when people truly believe life is a game. There’s no reset in life (that we know of). Those folks creep me out.

There is no substitute for individual, personal responsibility.

There is no reason why we should still have the living systems we currently have. We can do so much better. But I digress.

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